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(UPDATE) Insurers have pared back some of the morning's losses after the City regulator outlined some of the details of its planned review of historic pensions and investment sales.

The Financial Conduct Authority (FCA) has issued a statement about its plans, after insurance company shares dived this morning on a report in the Telegraph claiming the regulator would be reviewing policies dating back to the 1970s and could ban some of the exit fees attached to them.

The FCA said in a statement that it did not intend to remove exit fees from the policies 'providing they were compliant at the time' and would be reviewing only a representative sample of firms.

Shares in insurers rallied on the news, with most making up around half the ground lost in the morning's trading. Resolution (RSL.L), a buyer of old life insurers, had been hardest hit and was down by as much as 15% during the day. After the FCA's announcement, it mounted a moderate recovery to trade 7.6% down, a drop of 24p, at 295p. Closed book insurer Phoenix (PHNX.L) also mounted something of a recovery, to stand 87p, or 11.8%, down at 650p, having fallen to a low of 565p. The FCA's clarification did little to boost rival Chesnara (CSN.L), which now stands at 296p, a drop of 31p, or 9.5%.

Aviva was down 18.5p, or 3.8%, at 465p following the announcement, while Legal & General (LGEN.L) was down 8p, or 3.8%, at 204p. Prudential (PRU.L) and Standard Life (SL.L) were down 2.0% and 1.8% at £12.88 and 379p respectively. Old Mutual (OML.L), which has disposed of much of its UK legacy business, was affected little by reports of the FCA's plans. Following the FCA's announcement it stood at 200p, down by a penny, or 0.6%.

Financial services group St James's Place (SJP.L) meanwhile mounted a near-full recovery, and was down 3p, or 0.4% at 842p after the announcement.

The FTSE was up 39 points, or 0.6%, at 6627.

Insurers hammered as FCA widens charging probe (10:14)

Shares in insurance companies have dived sharply after reports the City regulator is planning an inquiry into their historic pension and investments sales.

According to The Telegraph, the Financial Conduct Authority (FCA) is to review sales of pensions, endowments, investment bonds and life insurance stretching back to the 1970s.

The FCA is concerned that insurers are exploiting long-standing customers, who are not given the treatment as new clients and are left with high fees and poor service, according to the paper.

The regulator is expected to announce the review on Monday and will consider banning exit fees that can deter customers from switching to another provider. It is honing in on the practice of some insurers to use these closed 'zombie' funds to cover the costs of other areas of their business.